The UK is home to more distressed companies than any other country in Europe, mostly because of a rise in corporate debt levels during the years of cheap credit that led to the global credit crunch.

Britain was home to 24% of distressed companies in Europe, up from 19% two years ago, and well ahead of the second-ranked country, Germany, which accounted for 14% of the European distressed market, according to a study by Close Brothers, the investment banking and advisory firm.

"It comes as little surprise that the UK has the highest portion of troubled businesses given the greater leverage taken on during the bubble years of private equity," said Andrew Cunningham, managing director at Close Brothers.

London acts as the European base of private equity firms such as Blackstone, TPG and KKR. Buyout firms have been criticised for pumping debt into the companies they buy as their main way of generating profits. Private-equity-sponsored firms that have already gone bust or are restructuring their debt include estate agency Foxtons and the holdings of Icelandic investor Baugur, which include retailers House of Fraser and Hamleys.

As many as 3,000 small firms are expected to go bust in Britain in October, after the summer break, according to corporate-turnaround specialists Tenon.

"Owners neglecting key issues combined with the difficult economic climate could send the number of business failures spiralling to unprecedented levels this autumn," said Carl Jackson, head of Tenon Recovery.

"Entrepreneurs who fail to deal with crucial business issues before they go on holiday could return to a nasty surprise."

Pub and restaurant businesses have complained that banks are denying them credit because of the problems associated with their industry. "The Forum of Private Business [FPB] is concerned that the entire sector may have been classed as high risk by certain lenders," the FPB recently said. "As a result, it is thought they have effectively imposed a blanket policy of not providing pubs and restaurants with loans, rather than looking into the viability of each business on a case-by-case basis."

Despite growing evidence that the economy's deterioration has slowed down, corporate defaults and insolvency levels are expected to peak at the end of the year as unemployment rises and consumers curb spending.